A real-life soap opera in Spanish-language television -- a saga of family legacy, corporate ambition and allegations of treachery -- is expected to shift today to a federal courtroom in Los Angeles.
The civil trial will pit two titans against each other and bring to the witness stand key executives who are accustomed to controlling the media behind the scenes rather than fighting over it in open court. At stake is the future of the widely popular telenovelas, a steamy mix of sex, romance and family intrigue that has made the Spanish-language shows among the most popular and profitable on American airwaves.
How the two adversaries -- Grupo Televisa of Mexico and Univision Communications Inc. of New York -- got to this point is a telenovela in itself. After years of squabbling, Televisa, the world’s largest producer of telenovelas, four years ago sued longtime partner Univision for breach of contract, alleging it had been cheated out of more than $100 million in royalties.
More significantly, Televisa is seeking to terminate a 25-year programming contract with Univision. The 1992 compact between the two companies requires that Televisa, which is controlled by Mexico’s 40-year-old media scion Emilio Azcarraga Jean, provide its shows exclusively to Univision through 2017.
Those prime-time dramas, which hook viewers with ageless themes of love and betrayal, have helped establish Univision as the dominant Spanish-language television company in the U.S., crushing rivals in the ratings. “Televisa has the monopoly on producing the programming that Hispanics prefer, and Univision has the monopoly on running that programming,” Hector Orci, chief executive of the advertising agency La Agencia de Orci, said Monday. “But if that deal falls apart, the nature of Spanish programming in the United States could change.”
Should its pipeline of Televisa programs run dry, Univision would be forced to develop new and probably more costly shows to air on its networks and Galavision cable channel. Such an undertaking would be difficult for Univision’s owners.
A group of private investors, including Los Angeles billionaire Haim Saban, acquired Univision two years ago in a $12.3-billion leveraged buyout that left the company under a mountain of debt. The new owners have been banking on continued profits from Televisa’s shows.
Advertising from Televisa programming generates about 35% of Univision’s $1.6 billion in television revenue, according to media consultant Julio Rumbaut.
“Univision needs Televisa more than Televisa needs Univision,” Rumbaut said. Finding alternative programming “would only add to the company’s financial pressures.”
The telenovelas appeal to Mexican immigrants and Mexican Americans, in part because they are familiar, reminding viewers of the television they watched with their parents and grandparents. Nearly two-thirds of Latinos in the U.S. are of Mexican descent, giving the Televisa shows a competitive edge over rivals such as Telemundo, which traditionally had a more Caribbean influence.
The programming carries another advantage. Univision knows which telenovelas scored big ratings during their initial run on Televisa’s channels in Mexico, so Univision doesn’t have to gamble on hits-and-misses. “The shows are very good and have been pre-tested,” Orci said.
Televisa, meanwhile, could boost its fortunes by shopping its shows to Univision rivals, including NBC Universal’s Telemundo, or English-language TV stations that could switch formats to appeal to the nation’s growing Latino population. Televisa also could put its shows online.
However, Televisa’s gambit to cut its ties to Univision might not be a sure thing.
“Univision has always complied with the terms of its agreements with Televisa,” said Univision’s lead attorney, John Keker. “When the jury hears the evidence, we are confident that they will understand that, and we will prevail at trial.”
Univision has said it has paid Televisa more than $1 billion in royalties over the years. It estimates that Televisa could earn an additional $2 billion in royalties before the contract expires. Univision also has paid under protest some of the monies Televisa says it is owed.
Televisa’s attorney, Marshall B. Grossman, said Televisa was simply attempting to exercise an option in the 1992 agreement that allows the contract to be terminated if there is a “material breach.”
U.S. District Judge Philip S. Gutierrez is scheduled to preside over the jury trial that was supposed to begin in April but has been postponed four times. The trial could last four weeks.
Univision’s colorful history dates back to the early 1960s, when Azcarraga’s grandfather, the late Mexican media pioneer Emilio Azcarraga Vidaurreta, helped establish the first Spanish-language television network in the U.S.
But his son, Emilio Azcarraga Milmo, was forced to sell the operation in the mid-1980s to comply with U.S. regulations that restrict foreign ownership of broadcast stations. He sold the network to Hallmark Cards Inc., but he resurfaced in 1992 when Hallmark was struggling amid the high costs of programming.
That’s when Azcarraga Milmo teamed up with Los Angeles media mogul A. Jerrold Perenchio to buy Univision for $550 million. Perenchio asked for a 25-year programming agreement, to which Azcarraga Milmo consented. Azcarraga Milmo died in 1997 and his son took over the family empire.
“This was a business relationship that began on personal relationships,” said USC communications professor Felix Gutierrez, who has followed Univision for more than three decades and is not related to the judge. “As the media business has grown, there has been mutual suspicion that one side was taking advantage of the other.”
Three years ago, Azcarraga Jean tried to reclaim his family’s heritage by acquiring Univision when Perenchio put the company up for sale. But Azcarraga Jean’s efforts were thwarted when a group including Saban Capital Group and the private equity firms Providence Equity Partners, Madison Dearborn Partners, Texas Pacific Group and Thomas H. Lee Partners outbid Televisa to claim the prize.